AUD/USD: Recovery moves capped near 0.7500 after Aussie Retail Sales, PBOC

• AUD/USD keeps early Asian recovery following the key data/events.
• Preliminary Aussie Retail Sales for May drops below 0.7% market consensus, PBOC keep benchmark rate unchanged near 3.85%.
• Market sentiment remains sluggish, US Treasury yields drop to three-month low.
• Second-tier US data, Fedspeak eyed for fresh impulse.

AUD/USD bulls ignore downbeat Aussie data as attacking the intraday high of 0.7512 amid the early Monday’s trading. In doing so, the Aussie pair keeps the early Asian recovery moves, amid the broad US dollar pullback, while snapping a four-day downtrend with a 0.42% intraday upside.

Australia’s first reading of May’s Retail Sales eased below 0.7% forecast and 1.1% MoM prior to 0.1%, justifying the market fears of the negative economic impact of Victoria’s snap lockdown. Also, on the same line could be the People’s Bank of China’s (PBOC) decision to keep the benchmark interest rate unchanged near 3.85% despite recently suggesting the pause in the further easy monetary policy.

It’s worth noting that the US dollar index (DXY) steps back from the 10-week top amid a downbeat performance of the US Treasury yields, helping the AUD/USD prices to remain firm by the press time. That said, the US 10-year Treasury yields drop to the lowest since early March, down 3.4 basis points (bps) to 1.41%, while tracking the US inflation expectations to the south.

Read: US Treasury yields drop to early 2021 levels during three-day downtrend

Given the US dollar’s consolidation of the recent gains, coupled with downbeat bond yields, equities in Asia-Pacific remain on the back foot with Japan’s Nikkei 225 being the biggest loser, down 3.22% intraday by the time of the press whereas S&P 500 Futures drop 0.30% on a day.

While cheering USD pullback, the AUD/USD pair ignores downbeat market sentiment as well as chatters relating to the Pacific major’s push to the World Trade Organization (WTO) for saving it from China’s tariffs. Also on the same side could be the global fears of the covid’s Delta variant and uncertainty over US President Joe Biden’s infrastructure and spending package.

Having witnessed an initial reaction to the Asian session’s key data/events, AUD/USD traders will keep their eyes on the Fedspeak and Chicago Fed National Activity Index for May, prior 0.24, for fresh impulse. Should the Fed policymakers remain hawkish, the US dollar rebound can’t be ruled out, which in turn will challenge the Aussie pair’s latest recovery moves.

Technical analysis

200-day SMA level near 0.7555-60, followed by the previous support line from December around 0.7580, restricts short-term AUD/USD upside, which in turn keeps the bear directed to August 2020 top near 0.7420-15.